SEC Preparing Civil Suit Against Cohen’s Hedge Fund SAC Capital

New York (HedgeCo.Net) – A week after hedge fund trader Mathew Martoma was charged with insider trading, the SEC is going after the hedge fund in question, Steven A. Cohen’s hedge fund SAC Capital, according to people familiar with the situation.

“In a call with investors Wednesday morning, SAC Capital Advisors revealed that it had received a notice from the SEC detailing charges that the government is preparing to file against the firm, according to a person familiar with the call.” The Washington Post reports.

Both SAC and Cohen are cooperating with the SEC investigation. Cohen and the hedge fund are “confident they have acted appropriately and will continue to cooperate with the government’s inquiry.” A SAC spokesman said. Not all inquiries are followed up by lawsuits.

“The SAC case illustrates the growing concern over insider trading among hedge funds. Since passage of Dodd-Frank, you have more than 1,000 newly registered funds acting as investment advisers,” Marc Powers, head of the securities litigation and enforcement practice at BakerHostetler says. “Not only are there potential 10b-5 violations but advisers are required to have proper policies and procedures in place to prevent misuse of material non-public information. Failure to have these in place exposes hedge funds to separate charges that can bring substantial penalties and create steep reputational damage among institutional investors, who are notoriously wary of money managers with regulatory problems.”